How were the Cipla numbers for the Dec-21 quarter and why where profits lower?

If year 2020 was the year that pharma benefited from the COVID pandemic, year 2021 was a return to more normalized reality. It has been a quiet year so far for the pharma sector. Cipla remains a predominantly India pharma play and less of a US play unlike many of its peers like Sun Pharma and Reddy Labs. API business of Cipla came under pressure due supply chain constraints and the price competition forcing margins lower in the quarter.

Cipla reported 6% yoy growth in sales at Rs.5,479 crore for the Dec-21 quarter. In the Dec-21 quarter, Cipla managed to sustain its traction across branded and generic markets across India and the US. The predominant India revenues, which his 46% of total Cipla revenues, grew by 13% yoy. This growth came on the back of core therapies and flagship brands.

In the US market, which accounts for nearly 21% of the total sales of Cipla and is smaller than India, the growth in the top line was 7% yoy in dollar terms for Q3. This was on the back of robust momentum in core business, with special reference to the respiratory portfolio. However, sequential revenues for Cipla in the pharma were -0.74% lower overall.

As per the latest update, Cipla has 167 approved Abbreviated New Drug Applications (ANDAs), 18 tentatively approved ANDAs and 72 ANDAs that are in the process of approval. ANDAs filed in the US for generic drug applications. Just to give a comparison with the EU market, the equivalent application in the European Union is called the Drug Master File or DMF which seeks approval from the EU regulators for generic drugs. EU is small for Cipla.

Operating profits were flat at Rs.984 crore with the pressure on operating profit growth coming specifically from the API business. In fact, the API (active pharma ingredients) alone accounting for a 27% fall in EBITDA in the latest quarter. This segment has seen a sharp rise in competition and thinning of margins in API business due to user level consolidation.

Net Profit were down -2.61% yoy at Rs.729 crore due to pressure on operating profits. Higher material costs and other expenses were partially offset by inventory efficiency gains, but only partially. PAT margins contracted from 14.47% in the Dec-20 quarter to 13.30% in the Dec-21 quarter. The PAT margins were higher by 41 basis point on a sequential basis. Overall you can almost call it a neutral quarter for Cipla.